Comment on the Maritime News

July-September 2003

   HOW MUCH WORSE CAN AVONDALE GET?  The news that Avondale has finally delivers its seventh and final sealift ship, the USNS Benavidez (T-AKR 306) is startling.  I had thought that they had delivered her back in June, but apparently not.  You read all the good words in Northrop Grumman's press release and you would never guess that the original contract delivery date for this, the seventh in a series of supposedly identical ships, was July 21, 2001.  That's right, July 21, 2001.  Let me see, now, that would have been, er, more than two years ago. Goodness!  The contract was awarded on December 18, 1998, so they signed up to build this ship in 31 months and it actually took them 57 months, 84% longer than planned.  And they launched her in July 2001, so she's been in the water, fitting out, for over two years!  Tim Colton, September 19, 2003.

   END OF ANOTHER GREAT SHIPBUILDER: THE AUCTION OF SPARROWS POINT LESS THAN A YEAR AFTER THAT OF QUINCY IS YET ANOTHER INDICATOR OF OUR INDUSTRY'S DECLINE.  As with Quincy, it can safely be assumed that the auction of the Sparrows Point shipyard will not result in it being sold as a shipbuilding facility.  Like Quincy, it hasn't built ships since the mid-80s, the skills required to build ships are long dispersed, and the markets don't exist any more to support another large-ship shipbuilder.  Baltimore Marine Industries tried hard, but never really had a chance.

Sparrows Point wasn't one of the world's great shipbuilders, as Quincy was, but it was a major shipbuilder by anyone's standards and certainly one of the world's great tanker builders.  Let me briefly recap its history and see if you don't agree.

The Sparrows Point shipyard was originally built in 1889 - two years before Quincy - by Maryland Steel Company and delivered its first ship in 1891.  It was bought by Bethlehem Steel in 1917, at which point it had built 176 ships, almost all commercial, but including three destroyers and six naval colliers.  Bethlehem kept building tankers, ore carriers, cargo ships and coastal passenger ships there all through the inter-war years, even when many other big yards were reduced to barge building, and by the time the emergency shipbuilding program started they were up to hull number 327.  To see Sparrows Point's pre-WWII production record, go to www.coltoncompany.com/shipbldg/ussbldrs/prewwii/bethsparrowspoint.htm.

The World War II effort saw the Sparrows Point shipyard at its best.  In the 8-year period from 1939 through 1946, the yard built 116 ships, made up of 68 tankers, 26 general cargo ships, 10 refrigerated cargo ships, 6 ore carriers and 6 passenger/cargo ships.  At its peak in WWII, the yard employed over 20,000 people.  To see Sparrows Point's WWII production record, go to www.coltoncompany.com/shipbldg/ussbldrs/wwii/merchantshipbuilders/bethsparrowspoint.htm.

In the post-WWII years, U.S. shipyards struggled to find work but Sparrows Point, like Quincy, kept busy building 128 ships - 83 tankers, 11 ore carriers, 3 lakers, 21 general cargo ships, 7 ammunition ships and 3 miscellaneous types - in the 25-year period between WWII and the passage of the Merchant Marine Act of 1970.  In the next 20 years, Sparrows Point broadened its horizons, building 21 tankers, 6 containerships, 8 jack-up drilling rigs, 6 tank barges, 3 container barges, 2 survey ships and a dry-dock.  In the 1970s, Bethlehem invested heavily in the facility, converting the construction process from the traditional inclined ways to a single very large graving dock, 1200 feet long by 200 feet wide and served by four 200-ton cranes.  They built five 265,000-ton tankers in it.  To see Sparrows Point's post-WWII production record, go to www.coltoncompany.com/shipbldg/ussbldrs/postwwii/shipyards/bethsparrowspoint.htm.

There were seven great U.S. shipbuilders in the 20th century: five great build-to-order naval shipbuilders - Cramp, Fore River (Quincy), New York Ship, Newport News and Union Iron Works - and two great mass-production merchant shipbuilders - Sun Ship and Sparrows Point.  Now Sparrows Point is gone, too, and only Newport News is left.  Tim Colton, September 15, 2003.

   HOW MUCH FOR A SUBMARINE?  It's an established fact that each successive version of any weapon system costs much more than its predecessor, even after allowing for inflation.  The great Norm Augustine documented that in his wonderful "Augustine's Laws" and quoted President Coolidge, who, in 1925, when told the cost of a squadron of the newest fighters, asked "Why can't we just buy one aeroplane and let the aviators take turns flying it?"

Our submarine builders, aided and abetted by the Navy, which wouldn't recognize value for money if it tripped over it in the street, are working hard to keep up the tradition, as shown in the chart below.  How can a submarine possibly cost so much and why do we even need them anymore? 

While we have the world's strongest navy by a wide margin, our infrastructure - bridges, highways, ports, transportation equipment, power systems, etc. - are obsolete and decrepit and, in some cases, literally falling down.  How great would our economy be if we put as much effort and investment into rebuilding our infrastructure as we do into defense?  Tim Colton, September 13, 2003.

   IS THE JACK-UP FLEET TOO OLD?  Yesterday's accident to Parker Drilling's rig PD 14J draws attention to the age of the rig fleet.  Parker Drilling itself operates seven jack-ups, with an average age of 26 years.  Parker's fleet is unusually old but the jack-up fleet as a whole now has 392 rigs, with an average age of 22 years: 99 of these rigs, 25% of the total, are 25 years old or older.  To me, this is completely unacceptable.  Jack-ups are not generally designed to last over 25 years and some models, not to mention any names, mind you, were not designed to last as long as that.  In addition, the operating profile of a drill rig is arduous, to put it mildly.  Isn't it about time to stop talking about fleet renewal and get on with it?  Maybe we need an OPA90-type phase-out program for crappy old drill rigs.  Tim Colton, September 12, 2003.

   MARAD STREAMLINES THE TITLE XI LIST.  Credit where credit is due: MARAD has done something sensible - they have cleaned the crap out of the list of pending Title XI applications.  This should have been done ages ago, but MARAD always used to claim that they had no power to do it.  Mind you, of the two really big projects, World City's gone and FastShip's still there, which makes no sense, but nobody's perfect.  Here's the new table:

PUBLIC DISTRIBUTION
MARITIME ADMINISTRATION
Title XI Ship Financing Guarantees
PENDING APPLICATIONS
Applicant No. of Ships Types of Vessels/Projects Shipyard Actual Cost to Applicant Requested Loan Amount Requested Term Arrival Date
FastShip Atlantic, Inc. 2 High-Speed Container Vessels Kvaerner Philadelphia Shipyard - Phila., PA $857,500,000.00 $750,500,000.00 Const. Period + 25 years 09/22/99
Pasha Hawaii Transport Lines LLC 1 Pure Car/Truck Carrier Halter Marine Inc. - Gulfport, MS $79,317,000.00 $69,403,000.00 Const. Period + 25 years 12/07/00
Vessel Management Services, Inc. 2 155,000 Barrel-Capacity ATB's Bay Shipbuilding - Sturgeon, WS $71,000,000.00 $61,400,000.00 25 yrs 03/07/01
Speede Shipyard, LLC & Metro Machine Corp N/A Shipyard Modernization   $39,691,419.00 $34,700,000.00 25 yrs 03/23/01
AHL Shipping Company 2 Double-hull Product Tankers $141,256,120.00 $123,599,105.00 25 yrs 07/12/01
K Ship 1-4, LLC. 4 Double-hulled, 45,000 DWT, Crude Oil and Product Carriers Kvaerner Philadelphia Shipyard - Phila., PA $68,000,000.00 $59,500,000.00 25 yrs 07/16/01
Harbor Fuel Service, Inc. 1 3,000 HP Harbor Tug Orange $6,617,250.00 $5,790,094.00 25 yrs 03/20/02
1 Double-hull Tank Barge Jeffboat LLC - Jeffersonville, IN
Cashman Equipment Corporation 29 Steel Deck Barges HBC Barge LLC - Brownsville, PA $14,076,923.00 $12,561,000.00 25 yrs 08/19/02
Cove Fleeting - Morgan City, LA
Rowan Companies, Inc. 2 Self-Elevating Mobile Offshore Jack-up Rigs LeTourneau, Inc. - Vicksburg, MS $200,909,000.00 $175,795,000.00 12 yrs 08/29/02
Alter Barge Line, Inc. 45 Covered Hopper Barges Trinity Marine Products, Inc. $11,740,000.00 $8,805,000.00 25 yrs 09/03/02
New York Trans Harbor, LLC 6 Low-Wake Motorized Catamaran Ferries Robert E. Derecktor, Inc. - Mamaroneck, NY $4,800,000.00 $3,840,000.00 25 yrs 11/18/02
Sterling Equipment, Inc. 4 Deck Barges HBC Barge, LLC - Brownsville, PA $8,487,000.00 $7,426,000.00 20 yrs 11/21/02
2 Dump Scow Corn Island Shipyard - Lamar, IN
      Conrad Industries - Morgan City, LA        
Lake Express LLC 1 Auto/Passenger Ferry Austal USA - Mobile, AL $18,650,000.00 $14,200,000.00 20 yrs 12/09/02
Port Imperial Ferry Corp. 5 Passenger Catamarans Allen Marine, Inc - Sitka, Alaska $12,315,084.00 $10,775,000.00 25 yrs 01/13/03
Totem Ocean Trailer Express, Inc. 1 Orca-Class RO/RO Vessel National Steel & Shipbuilding Co - San Diego, CA. $162,300,000.00 $142,000,000.00 Const. Period + 25 years 1/13/2003
Kvaerner Philadelphia Shipyard, Inc.

N/A

Shipyard Modernization   $34,300,000.00 $30,000,000.00 18 yrs 4/4/2003
     TOTAL

108

$1,730,959,796.00 $1,510,294,199.00

If we ignore FastShip, as we have all been trying to do for years now, the total is about $760 million.  At a leverage ratio of 20 to 1, it would only require $38 million in appropriated funds to approve the lot.  And we don't need to approve the lot.  Quite a few of these vessels have already been built and are in operation.  Doesn't that suggest that the viability of their applications was not exactly dependent on the availability of Title XI financing and that these projects would have gone ahead even if the Title XI program didn't exist?  If so, why should they get Title XI financing now?

Note that, although this table was posted on the MARAD web site on July 18, it's dated June 16.  Since then, the Lake Express application has been approved.  Tim Colton, July 30, 2003.

   THE LITTORAL COMBAT SHIP (LCS) WILL BE BUILT IN A SECOND-TIER SHIPYARD.  The Navy announced today that it had awarded three contracts for the preliminary design of the LCS.  Here's what they said:

The following three companies are each being awarded a firm-fixed-price contract for the performance of Flight 0 Littoral Combat Ship Preliminary Design: General Dynamics - Bath Iron Works, Bath, Maine ($8,900,000); Lockheed Martin Naval Electronics & Surveillance Systems - Surface Systems, Washington, D.C. ($9,993,359); Raytheon Company, Integrated Defense Systems, Portsmouth, R.I. ($9,996,124). Each contractor will perform a preliminary design effort to refine its proposed Littoral Combat Ship concept. The Littoral Combat Ship will be a networked, agile, and high-speed surface combatant with versatile warfighting capabilities optimized for littoral missions. Work will be performed in Bath, Maine, Arlington, Va., Mobile, Ala., Rockville, Md., Washington, D.C., Lockport, La., Marinette, Wis., Portsmouth, R.I., Alexandria, Va., and Jacksonville, Fla., and is expected to be completed in February 2004. Contract funds will not expire at the end of the current fiscal year. These contracts were competitively awarded through a full and open competition, with six offers received. The Naval Sea Systems Command, Washington, D.C., is the contracting activity (N00024-03-C-2310, 2311 and 2312 respectively.)

Of the three winners, GD's team includes Austal USA, and, by extension, Bender Shipbuilding and Tampa Bay Shipbuilding; Lockheed Martin's team includes Bollinger Shipyards and Marinette Marine; and Raytheon's team includes Atlantic Marine and, by extension, Alabama Shipyard.  Of the three losers, Northrop Grumman had no second-tier shipbuilder on its team; Textron had both its own yard and VT Halter Marine; and latecomer Titan Corp. had Nichols Bros. 

Conclusion: assuming that the program goes ahead, these high-performance small vessels will be built in one or more second-tier shipyards, which is not only as it should be but exactly what we have been preaching here all along.  If the Navy can stay this course, it will get the ships it wants, it will get them at a reasonable price and it will get them on an acceptable schedule.  Of course it's not over yet.  Not only are there reactionary forces in the Navy that don't want these ships, but we can confidently now expect to see Northrop Grumman deploying all its considerable resources to kill the program altogether and shift the funds into the DD(X) program.  Tim Colton, July 17, 2003.

   AVONDALE LAUNCHES LPD 17.  The first of the new class of LPDs, San Antonio, was finally launched this week and will be christened on Saturday.  And a strikingly good-looking ship it is, as you can see from the photograph below, copied from Northrop Grumman's press release.  Although about 27 months behind the original contract schedule and goodness knows how many hundreds of millions of dollars over the original budget, this event is nevertheless very good news.  Now, maybe, all the design problems are in the past and the shipyard will be allowed to get on with the job of building 12 ships as systematically and cost-effectively as possible.  Will this happen?  Probably not, but not through any particular fault of Northrop Grumman's, desperately bad at managing shipyards though they are.  No, the LPD program will continue to be ludicrously expensive, possibly even progressively more expensive, ship by ship - only in modern-day naval shipbuilding do we see negative learning curves - because the Navy will continue to mess with the design and the Congress will continue to stretch out the funding.  When will they ever learn?  Again and again, we tell them, (not just me, we all tell them): if you want cheaper ships, (1) design a cheaper ship, (2) design the ship completely before you start building it and (3) fund the whole program in advance, not ship by ship.  But they don't listen, probably never will.  Never mind.  Tim Colton, July 17, 2003.

San Antonio (LPD 17) (thumbnail)

   CONOCOPHILLIPS TO OPEN NEW ERA OF LNG SHIPPING?  The announcement from ConocoPhillips that it has signed a Heads of Agreement with Qatar Petroleum for the development of an LNG project that would result in U.S. imports of 7.5 million tonnes a year opens the possibility of a new era in the marine transportation of LNG.  The first era was experimental, starting with Conoco itself, which built the barge Methane at Ingalls Shipbuilding in 1955, and continuing through Gotaas-Larsen's construction of the first large (i.e., 125,000+ cubic meters) vessels, at Moss Stavanger in 1975.  Since then, almost all new LNGCs have been essentially the same size, although that size has been gradually creeping toward 150,000 cubic meters.  Now, the opportunity arises for a quantum jump and it can be no coincidence that Samsung Heavy Industries recently unveiled its design for an LNGC with a capacity of 225,000 cubic meters.

In round numbers, 7.5 million tonnes a year is 13 million cubic meters a year.  Also in round numbers, an LNGC can make 7 round trips a year between Qatar and Lake Charles.  Ergo, as we over-educated folks say, it would take at least 12 conventional LNGCs to move all that gas, but only 8 of Samsung's new 225,000-cubic meter LNGCs.  (Shall we call them VLGCs?)  This is an exciting prospect, especially as industry sources say that ExxonMobil will soon announce an LNG import project of similar size.

The only depressing thing about this news is that none of these ships will be built in the U.S.  Younger readers may not realize that the LNG shipping industry was developed in the U.S. and 16 of the early large LNGCs were built in U.S. shipyards, three at once-great but now hopeless Newport News, three at once-great but now hopeless Avondale and ten at once-great but now defunct Quincy.  If we still had even one half-competent big-ship shipbuilder, we might expect that it would be possible to work a deal to build at least one in four of all new US-trading LNGCs in the U.S.  But we haven't, so it won't happen.  Tim Colton, July 12, 2003.

   SHOULD MARAD SELL PUBLIC INFORMATION?  The U.S. Maritime Administration (MARAD) has announced that it is offering U.S. cruise industry statistics for sale at the startling rate of $1,200.00 a year.   Is this legal?  Even if it is, is it appropriate?  Are these data not in the public domain, in the same sense that the enormous quantities of data generated and analyzed by the Bureau of the Census are freely available to anyone who's interested.  If MARAD has some interesting statistics, shouldn't they be freely available too, either directly from MARAD or from the excellent Bureau of Transportation Statistics?  Maybe MARAD is just trying to recover it's investment in AMCV.  Let's see: $330 million divided by $1,200 equals 275,000 subscriptions, say 100 subscriptions a week for the next 55 years.  Tim Colton, July 10, 2003.

For comment on maritime news reported in earlier quarters, click on one of the following links:

Second Quarter of 2003

First Quarter of 2003

Fourth Quarter of 2002

Third Quarter of 2002

Second Quarter of 2002

First Quarter of 2002

Fourth Quarter of  2001

If you have comments or questions, suggestions or complaints, please e-mail me.